The Report states that "Investment in equipment and software (E&S) continues
to languish. Firms reportedly remain reluctant to undertake new projects because
of the uncertainty about the economic outlook and heightened risk aversion in
the wake of last yearís corporate governance and accounting problems. ... In
addition, technological advances continue to depress the relative price of
computers at a time when stretched-out replacement cycles have apparently
widened the gap between the latest technology and that embodied in many of the
machines currently in use."

The report adds that "Real outlays on high-tech equipment and software rose
at an annual rate of about 11 percent in the first quarter, a bit faster than
they had in 2002. Real purchases of computers and peripheral equipment remained
on the moderate uptrend that has been evident since such spending bottomed out
in 2001, and outlays on communications equipment picked up after an extended
period of weakness."

It also states that "Real E&S spending appears to have turned up in the
second quarter, in part because of a step-up in the pace of real computer
investment. However, incoming data suggest that outlays on communications
equipment did not repeat their first-quarter spurt."

The Report also addresses employment. It states that "Employment in the
information sector, which includes telecommunications, publishing, and
Internet-related services, continued to decrease, though a shade less rapidly
than over the preceding two years."

7/15. The Senate Finance
Committee held a hearing titled "An Examination of U.S. Tax Policy
and Its Effect on the International Competitiveness of U.S.-Owned Foreign
Operations."

Sen. Charles Grassley (R-IA), the
Chairman of the Committee, stated in his
opening statement [PDF] that "International tax
reform is long overdue. Our current system is based on a framework enacted
during President Kennedyís administration. In an era of expanding global
markets, falling trade barriers, and technological innovations that melt away
traditional notions of national borders, it is critical that our international
tax laws keep pace with new business realities."

Similarly, Sen. Max
Baucus (D-MT), the ranking Democrat on the Committee, stated in his
opening statement [PDF] that "Our
international tax laws have not kept up with the increased globalization of the
economy."

Pamela Olson,
Deputy Assistant Secretary at the Department of the Treasury, stated in her
prepared testimony
that "our tax code has not kept pace with the changes in our economy. From the
vantage point of the increasingly global marketplace in which U.S. companies
compete, our tax rules appear outmoded, at best, and punitive of U.S. economic
interests, at worst. Most other developed countries of the world are concerned
with setting a competitiveness policy that permits their workers to benefit from
globalization."

Olson
(at right) also addressed the research and development tax credit. She stated that
"The President's budget also proposes to make permanent the research and
experimentation tax credit. Research is central to American businessesí ability
to compete successfully in the global economy. It results in new processes and
innovative products that open up new markets and create job opportunities.
American businesses can continue to compete only if they stay at the forefront
of technological innovation. The research credit encourages technological
developments that are an essential component of economic growth and a high
standard of living in the future. A permanent research credit would remove the
uncertainty about its availability in the future and thereby enable businesses
to factor the credit into their decisions to invest in research projects."

Dan Kostenbauder, VP for Transaction Taxes at Hewlett
Packard, wrote in his
prepared testimony [12 pages in PDF] that "Congress
should enact forward looking reforms to the international tax provisions of the
Internal Revenue Code that will enhance the ability of American companies to
compete in global markets and emphasize the strengths of the U.S. economy."

He recommended that Congress repeal the
foreign base company rules. He elaborated that "The
foreign base company sales income and foreign base company services income rules
of Subpart F place major constraints on the ability of U.S.-based companies to
operate in overseas markets -- a restriction that is not shared by our
foreign competitors."

He also recommended that Congress increase the foreign tax credit
carry forward period from 5 to 10 years, and remove the 90% limitation on
claiming foreign tax credits from the Alternative Minimum Tax.

7/15. The House began consideration of
HR 1950,
the "Foreign Relations Authorization Act, Fiscal Years 2004 and 2005". The final
vote may take place on Wednesday, July 16.

During debate on Tuesday, July 15, the House rejected an
amendment [3 pages PDF
scan] offered by Rep. Ellen
Tauscher (D-CA) that would have allowed exporters of commercial communications
satellites to share marketing information with prospective customers in NATO
countries, and in Japan, Australia, and New Zealand. The amendment would not
have allowed the transfer of any sensitive encryption and/or source code data, detailed
design data, engineering analysis, or manufacturing know-how.

The amendment was narrowly defeated by a vote of 207-219. See,
Roll Call No. 366. Voting correlated with party affiliation. Democrats
tended to vote for the amendment, while Republicans tended to vote against it.

The bill also includes other technology and communications related provisions.
It includes a version of the "Global Internet Freedom Act", which had
previously been introduced as a stand alone bill by
Rep. Chris Cox (R-CA) and
Rep. Tom Lantos (D-CA). It would
authorize funding for a new Office of Global Internet Freedom, which would
"develop and implement a comprehensive global strategy to combat state-sponsored
and state-directed Internet jamming and persecution of those who use the
Internet."

It also authorizes an appropriation of $1.3 Billion over two years for the
Broadcasting Board of Governors. This would enable it to increase broadcasting
by Voice of America in the Middle East.

People and Appointments

7/15. Jerry Duvall was named Director of Media Economic
Research in the Federal Communications Commission's
(FCC) Media Bureau. He will lead a "new
economic research initiative that will emphasize independent market analysis and
forward thinking research on how media markets operate today and how they will
operate in the future". Tracy Waldon was picked to replace Duvall as the
Media Bureau's Chief Economist. See, FCC
release [PDF].

7/15. The Department of Homeland Security (DHS)
announced that on June 27, 2003 it entered into a five year, $90
Million agreement with Microsoft, under which Microsoft will be the
primary technology provider to the DHS to supply software for about 140,000
desktops, as well as server software. The agreement provides the DHS with a
standard desktop configuration that includes Windows XP Operating System,
Microsoft Office Professional, and the Core Client Access licenses. This comes
to about $642.86 per desktop.

7/15. President Bush submitted a
message to the Congress supporting legislation to implement the
U.S. Singapore Free
Trade Agreement. He wrote that "This Agreement provides state-of-the-art
intellectual property protection, including significant commitments on trade in
digital products. It ensures that electronic commerce will stay free of duties
and discriminatory rules. In addition, Singapore will accede to international
treaties dealing with copyright and access issues for the Internet." He also
wrote a similar
message to the Congress regarding the
U.S. Chile Free
Trade Agreement.

7/15. The Federal Communications Commission (FCC)
released its
Eighth
Report [147 pages in PDF] in its proceeding titled "Annual Report and
Analysis of Competitive Market Conditions With Respect to Commercial Mobile Services".
The FCC announced this report at its June 26 meeting. This is WT Docket No. 02-379.

7/14. The U.S. Patent and Trademark Office
(USPTO) published a
notice in the Federal Register that describes and lists rule changes
pertaining USPTO fees. See, Federal Register, July 14, 2003, Vol. 68, No. 134,
at Pages 41532 - 41535. These changes take effect on October 1, 2003. However,
legislation is pending in the Congress that would supercede this rule. On July 9,
the House Judiciary
Committee approved
HR 1561,
the "United States Patent and Trademark Fee Modernization Act of 2003".
See, story titled "House Judiciary Committee Approves USPTO Fee
Bill" in TLJ Daily E-Mail Alert No. 695, July 10, 2003.

7/14. The Securities and Exchange Commission
(SEC) filed a civil
complaint
in U.S. District Court (DC) against
Carnegie International Corporation and several of its officers alleging
violation of federal securities laws in connection with improperly reporting
revenue and income on three transactions in filings with the SEC. Carnegie is a
former publicly traded holding company that owned and operated a credit card
services company, a telephone entertainment company, and a voice recognition
technology company. The individual defendants are David Gable (Chairman), Lowell
Farkas (P/CEO), David Pearl (Secretary), Richard J. Greene (former CFO), Scott
Caruthers (former director), and Dashielle Lashra Caruthers. The complaint
alleges violation of Section 17(a) of the Securities Act of 1933, Section 10(b)
of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and violation
of the reporting, books and records, and internal controls provisions of
Exchange Act Sections 12(g), 13(a), 13(b)(2)(A), and 13(b)(2)(B), and Exchange
Act Rules 12b-20 and 13a-1. The SEC also stated in a
release that
"Without admitting or denying the allegations in the Commission's complaint, all
of the defendants except Gable have agreed to settle the Commission's charges by
consenting to the entry of final judgments that, if approved by the Court, would
permanently enjoin them from further violations of the securities laws. In
addition, Farkas and Pearl have consented to be permanently barred from serving
as officers or directors of any public company."

7/15. Federal Communications Commission
(FCC) Commissioner
Jonathan Adelstein issued a
release [PDF] in which he, again, criticized the FCC's
Report and Order and Notice of Proposed Rulemaking [257 pages in PDF]
regarding its media ownership rules. The FCC announced the Report and Order on June 2, and
released it on July 2. In this release, Adelstein stated that "In an
apparent blunder, the FCC's new rules count Minot,
North Dakota, as if it had more TV stations than Detroit, Michigan. Many small
markets are now considered among the largest in the country. Iím asking my
colleagues to reconsider the rule changes so we can fix this anomaly before new
mergers take place that let a single owner dominate the media in many smaller
towns." See also, stories titled "FCC Announces Revisions to Media
Ownership Rules" and "Reaction to the FCC's Media Ownership Announcement"
in TLJ
Daily E-Mail Alert No. 672, June 3, 2003, and story titled "FCC Releases
Media Ownership Order and NPRM" in TLJ Daily E-Mail Alert No. 692, July 7, 2003.

10:00 AM. The
House Judiciary Committee will
hold a meeting to mark up several bills, including
HR 49, the
"Internet Tax Nondiscrimination Act". The meeting will be webcast.
Press contact: Jeff Lungren or
Terry Shawn at 202 225-2492. Location: Room 2141, Rayburn Building.

5:15 PM. The U.S. and E.U. Internet Caucuses will hold a press conference
to address meetings this week between members of the European Parliament, the
Congress, and government officials regarding cross Atlantic internet policy.
Location: Room 1302, Longworth Building.

9:30 AM. The Senate Judiciary
Committee will hold an executive business meeting. The agenda includes
consideration of several judicial nominees: William Pryor (U.S. Court
of Appeals for the 11th Circuit), James Browning (District of New Mexico),
Kathleen Cardone (Western District of Texas), James Cohn (Southern District of
Florida), Frank Montalvo (Western District of Texas), and Xavier Rodriguez
(Western District of Texas). The agenda also includes consideration of several
executive branch nominations: Jack Goldsmith (Assistant Attorney
General in charge of the Office of Legal Counsel), Christopher Wray
(Assistant Attorney General in charge of the Criminal Division), and Michael
Garcia (Assistant Secretary, Department of Homeland Security). The agenda also
includes consideration of several bills and resolutions, including legislation
implementing the U.S. Singapore Free Trade Agreement and the U.S. Chile Free
Trade Agreement; the Committee has jurisdiction over the visa provisions. See,
notice.
Press contact: Margarita Tapia at 202 224-5225. Location: Room 226, Dirksen
Building.

10:00 AM. The Senate Finance
Committee will meet in executive session to consider the United
States-Chile Free Trade Agreement Implementation Act, and the United
States-Singapore Free Trade Agreement Implementation Act. This session will
take place during the Committee's hearing on nursing home quality, as soon as
a quorum is present. Location: Room 215, Dirksen Building.

1:00 PM. The House Judiciary
Committee's Subcommittee on Courts, the Internet, and Intellectual
Property will hold a hearing on
HR 2517,
the "Piracy Deterrence and Education Act of 2003." The hearing will be
webcast. Press contact: Jeff Lungren or
Terry Shawn at 202 225-2492. Location: Room 2141, Rayburn Building.

Friday, July 18

RESCHEDULED?9:30 AM.
The Senate Judiciary
Committee will hold a hearing on several pending judicial nominations:
Steven Colloton (U.S. Court of Appeals for the Eighth Circuit), Henry Floyd
(District of South Carolina), Brent McKnight (Western District of North
Carolina), David Proctor (Northern District of Alabama). The hearing will also
include the nomination of Rene Acosta to be an Assistant Attorney General in
charge of the Civil Rights Division. Press contact: Margarita Tapia at 202
224-5225. Location: Room 226, Dirksen Building.

3:00 PM. The House Commerce
Committee's Subcommittee on Telecommunications and the Internet will hold
a hearing titled "The Regulatory Status of Broadband Services: Information
Services, Common Carriage, or Something in Between?" The hearing will be
webcast. Press contact: Ken Johnson or Jon Tripp at 202 225-5735. Location:
Room 2123, Rayburn Building.

Deadline to submit comments to the Federal
Communications Commission (FCC) in response to its Notice of Inquiry (NOI)
pertaining to the possibility of incorporating receiver performance specifications
into the FCC's spectrum policy. This NOI follows the recommendations of the FCC's
Spectrum Policy Task Force (SPTF)
report [PDF] of November 15, 2002. See,
story titled
"FCC Announces NOI Re Receiver Performance Standards" in TLJ Daily E-Mail Alert
No. 624, March 17, 2003. See also,
notice in the Federal Register, May 5, 2003, Vol. 68, No. 86, at Pages 23677 -
23686. This is ET Docket No. 03-65, FCC 03-54. For more information, contact
Hugh Van Tuyl at the FCC's Office of Engineering and Technology (OET) at 202 418-7506 or
hvantuyl@fcc.gov.

Deadline to submit comments to the U.S. Patent
and Trademark Office (USPTO) in response to its
notice in the Federal Register requesting public comments regarding changes
needed to implement a Patent Cooperation Treaty (PCT) style Unity of Invention
standard in the U.S. See, Federal Register, May 20, 2003, Vol. 68, No. 97, at
Pages 27536 - 27539. For more information, contact Robert Clarke at 703 305-9177 or
robert.clarke@uspto.gov.

Deadline to submit comments to the Federal
Communications Commission (FCC) in response to its notice of proposed
rulemaking, released on April 30, 2003, regarding changes to its rules
implementing the FCCs policy to carry forward unused funds from the schools
and libraries universal support mechanism (aka e-rate subsidies) in subsequent
funding years. See,
notice in the Federal Register, June 20, 2003, Vol. 68, No. 119, at Pages
36961 - 36967.

? 10:00 AM. The Senate Judiciary
Committee will hold a hearing on several pending judicial nominations:
Steven Colloton (U.S. Court of Appeals for the Eighth Circuit), Henry Floyd
(District of South Carolina), Brent McKnight (Western District of North
Carolina), David Proctor (Northern District of Alabama). The hearing will also
include the nomination of Rene Acosta to be an Assistant Attorney General in
charge of the Civil Rights Division. Press contact: Margarita Tapia at 202
224-5225. Location: Room 226, Dirksen Building.

3:00 PM. The National
Telecommunications and Information Administration (NTIA) will hold a
public briefing on its creation of a second level domain within the .us
country code domain that is restricted to material that is not harmful to
minors. This is required by the Dot
Kids Implementation and Efficiency Act of 2002,
HR 3833
in the 107th Congress, Public Law No. 107-317. This
briefing will provide information about the domain, instructions about
registering a kids.us address, content guidelines and restrictions, and an
overview of the content review process. See,
NTIA
notice. Location: Room 2123, Rayburn Building.

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